Consumers in China’s lower-tier cities are spending more on baby and maternal products while showing more of a willingness to buy compared with residents of first- and second-tier cities, and this presents opportunities for industries such as infant formula, children’s clothing and education, a new survey found.
Despite having only about half the income as consumers in China’s upper-tier cities, those in lower-tier cities have been sparing no expense on children’s products with a slightly higher average annual consumption per capita than consumers in upper-tier cities, a survey by consulting firm OC&C showed on Tuesday.
Conducted in March, the survey covered about 1,800 consumers in Guangdong and Henan provinces and Shanghai municipality, with a majority of participants being from China’s lower-tier-cities.
Comprising over 70 percent of China’s population, consumers in third- and fourth-tier cities became a significant growth engine of some industrial innovators like Pinduoduo, which gained momentum in China’s lower-tier cities with its group purchase platform.
When it comes to spending, consumers in lower-tier cities are more family-oriented compared with consumers in higher-tier cities. In addition, they are seeking social recognition and status symbols through shopping, said Veronica Wang, a partner at OC&C Strategy Consultants.
The survey revealed that consumers in lower-tier cities showed an increasing willingness to buy entry-level luxury products and they are more accepting of local brands and small brands because of their income limitations. Meanwhile, compared with consumers in upper-tier cities, those in lower-tier cities are more affected by the latest craze promoted by “key opinion leaders” and bloggers on social media, and therefore their brand loyalty is rather low.
OC&C believes that lower-tier cities provide business potential for business in cosmetics, skincare and entry-luxury products considering the consumer behaviors and willingness.
However, global luxury brands will still be cautious about opening brick-and-mortar stores on the Chinese mainland, especially during the COVID-19 pandemic, Wang said, adding that the luxury brands are likely to expand online sales channels to embrace consumers as Chinese consumers, in general, are used to relying on multiple channels to do shopping.
As some young people choose to return to lower-tier cities to work and live, their consumption behaviors and habits were brought along to these cities. It is expected that consumer behaviors of the two groups will gradually converge, Wang said.
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